12:01 am

Wed December 14, 2011

Kodak Shifts Focus, Zooms In On Commercial Printing

This camera was for sale in Australia when Kodak announced that it would close its Melbourne manufacturing plant in 2004 due to a rise in digital photography. A decline in the sale of digital cameras has caused the company to again shift focus, this time towards commercial printing.

Kodak has seen digital camera sales dwindle in recent years. This Henrietta, N.Y., Best Buy keeps only a few of them on shelves, leaving most to online sales. Kodak is looking to largely forgo the consumer camera market and focus instead on commercial printing products.

Zack SewardWXXI

The photography pioneer Kodak has been dogged by bankruptcy rumors, its stock has tumbled, and its cash reserves have shrunk. But the company says it expects a strong fourth quarter as it fights toward profitability in 2012.

"I grew up in a Kodak family — aunts, uncles, father, brother-in-law," says Linda Nau. Her connection to the company is similar to that of a lot of native Rochesterians. Nau herself even worked at Kodak.

As a college kid in the late '60s, she was paid $10 an hour for a summer job making sure film canisters didn't let in light. But now, more than 40 years later, Nau is helping her husband pick out a new camera in a Rochester-area Best Buy store.

And Kodak is not part of the conversation.

"Why?" she says. "I don't think the quality of the Kodak cameras are as good as they used to be."

During holiday shopping season on Kodak's home turf, you might assume this is troubling news for the imaging giant. But, according to Kodak, you'd be wrong.

The New Kodak

"We expect a very good fourth quarter," said Kodak CEO Antonio Perez.

Kodak declined to speak with NPR for this story, but Perez spoke on the company's investor conference call last month. He said that things are looking up.

"All four of our digital growth businesses will expand in the fourth quarter," Perez said.

But none of those are camera businesses. Kodak even recently sold off its image-sensor division, reportedly for a couple hundred million dollars.

Kodak has long been in the process of a painful transformation that's seen tens of thousands of Kodak workers in the Rochester area lose their jobs.

When Perez talks about the company's "digital transformation" and the "new Kodak," he's talking about four growth businesses in particular — three of which serve the commercial printing industry.

Perez says, "They will be the nucleus of the new Kodak."

In short, Kodak is becoming a company that makes high-end printing equipment — not a consumer staple whose brand once rivaled Coca-Cola's in global ubiquity.

Kaufman has seen the company's stock plummet in the last year, driven by investor fears that Kodak is on its last legs. These fears were driven by a recent move to tap a revolving credit line, the shuffling of key legal advisers, and higher-than-expected losses that have sunk Kodak shares to less than a dollar.

But Kaufman says there is some reason for optimism.

Fourth-Quarter Optimism

"This is an important quarter," he says, "because they've actually started to make some inroads in getting the cash on the balance sheet."

Kaufman expects Kodak to finish up the year in relatively decent shape.

An upcoming patent sale could net the company billions. Several of Kodak's massive, $3 million printing presses will come online in Asia. Once they're up and running, they run exclusively on Kodak inks and print heads.

Kaufman even says a seasonal surge in movie film and catalog printing creates an inflow of cash.

"If you really think about who the end users are," Kaufman says, "[they're] more businesses than individual consumers."

This brings us back to Linda Nau at the Rochester-area Best Buy.

Of the four pillars of the "new Kodak," only one — desktop inkjet printing — is consumer-oriented.

While Kodak digital cameras have been relegated to the Best Buy website because of poor sales, you can get a Kodak printer at the store. Nau isn't buying. She already has a printer — made by Canon. But when she prints out photos, she does use Kodak paper.

Let's go now from new technology to a classic brand trying to stay relevant. The American photography pioneer Kodak is also struggling just to survive. The company is being dogged by bankruptcy rumors; its stock has tumbled to less than a dollar. Kodak is still sounding optimistic, at least in public. It expects strong fourth quarter earnings.

Zack Seward from the Innovation Trail Reporting Project in upstate New York sent us this story from Kodak's hometown of Rochester.

ZACK SEWARD, BYLINE: Linda Nau is like a lot of native Rochesterians.

LINDA NAU: I grew up in a Kodak family. I have aunts, uncles, father, brother-in-law.

SEWARD: Nau herself even worked at Kodak. As a college kid in the late '60s, Nau was paid 10 bucks an hour for a summer job making sure film canisters didn't let in light. But now more than 40 years later, she's in a Rochester area Best Buy, helping her husband pick out a new camera. And Kodak is not part of the conversation.

NAU: Unfortunately no.

(SOUNDBITE OF LAUGHTER)

SEWARD: Why?

NAU: Why? I don't think the quality of the Kodak cameras are as good as they used to be.

SEWARD: During holiday shopping season on Kodak's home turf, you might assume this is troubling news for the imaging giant. But according to Kodak, you'd be wrong.

ANTONIO PEREZ: We expect a very good fourth quarter.

SEWARD: That's Kodak CEO, Antonio Perez. Kodak wouldn't talk to us on tape for this story, but Perez spoke on the company's investor conference call last month, saying that things are looking up.

PEREZ: All four of our digital growth businesses will expand in the fourth quarter.

SEWARD: But none of those are camera businesses. Kodak even recently sold off its image-sensor division, reportedly for a couple hundred million dollars. Kodak has long been in the process of a painful transformation that's seen tens of thousands of Kodak workers in the Rochester area lose their jobs. But when Perez talks about the company's digital transformation and the new Kodak, he's talking about four growth businesses in particular - three of which serve the commercial printing industry.

PEREZ: They will be the nucleus of the new Kodak.

SEWARD: In short, Kodak is becoming a company that makes high-end printing equipment - not a consumer staple whose brand once rivaled Coca-Cola's in global ubiquity.

MARK KAUFMAN: That's fading away - by design.

SEWARD: Mark Kaufman is an analyst who follows Kodak for Rafferty Capital Markets. He's seen the company's stock plummet in the last year, driven by investor fears that Kodak is on its last legs. A recent move to tap a revolving credit line, the shuffling of key legal advisers and higher than expected losses have sunk Kodak shares to under a dollar. But Kaufman says there is some reason for optimism.

KAUFMAN: This is an important quarter because, well, they've actually started to make some inroads in getting the cash on the balance sheet.

SEWARD: Kaufman expects Kodak to finish up the year in relatively decent shape. An upcoming patent sale could net the company billions. Several of Kodak's massive $3 million printing presses are coming on-line in Asia. And once they're up and running they run exclusively on Kodak inks and print heads. Kaufman even says a seasonal surge in movie film and catalog printing creates an in-flow of cash.

KAUFMAN: If you really think about it, who the end users are - more businesses than individual consumers.

(SOUNDBITE OF VOICES)

NAU: But that's the one you recommend, right?

UNIDENTIFIED MAN: Oh yeah. I mean...

SEWARD: Which brings us back to Linda Nau at the Rochester area Best Buy. Of the four pillars of the new Kodak, only one - desktop inkjet printing - is consumer oriented. While Kodak digital cameras have been relegated to the Best Buy website because of poor sales, you can get a Kodak printer at the store. But Nau isn't buying. She already has a printer - made by Canon. But when she prints out photos at home, she does use Kodak paper.